The 3 'pain points' that derail hospital affiliations (and how you can overcome them)

While mergers and acquisitions grab many health care headlines, they're by no means the only types of strategic partnerships. Affiliation agreements between well-known care organizations and community hospitals are increasingly popular. They're typically designed to boost volumes and clinical trial accruals, build brand recognition, and improve community care quality—without the financial and legal commitment of a full merger or acquisition.

Form and function vary greatly across affiliations, from strictly branding agreements to deep clinical integration. Among more integrated affiliations, there are three common pain points that can make both partners fall short of their goals for the agreement. Here are workarounds for three typical frustrations.

1. Pain point: Affiliate misses clinical trial accrual goals

Lagging clinical research infrastructure can set affiliates[1] behind in meeting their clinical trial accrual goals for hub-sponsored trials. In turn, enrollment numbers for the hub's sponsored trials can fall. Clinical research requires extensive, typically budget-negative, management. Community programs without robust clinical trial programs likely don't have the resources in place before entering an affiliation. Even after, it's often challenging for affiliates to build out new capacities. Hubs can struggle with extending sufficient resources to their affiliates.

Solution: Hubs should consider approaches to offer affiliates comprehensive and sustainable support. At one cancer hospital hub in the southeast, this means assessing its costs for common services and offering them à la carte on a cost-plus-margin basis. This hub planned to offer four major services under this payment structure: IRB support and monitoring, access to clinical trials management systems, on-site study coordination, and fiscal and billing services.

2. Pain point: Affiliate falls behind hub's quality standards

In affiliations, the partners' reputations begin to entwine. Hubs may be concerned that their brand may suffer if an affiliate's quality performance falls below standard. On the other hand, an affiliate program may feel like the hub doesn't understand community-centered challenges or provide sufficient guidance to meet clinical improvement goals.

Solution:Affiliate sitequality audits are an important first step when exploring and negotiating affiliations. But quality improvement and monitoring should be an ongoing process. By understanding quality gaps, partners can customize a plan for continuous improvement and formalize their process to monitor quality metrics. Of course, affiliates have clinical expertise of their own. Two-way sharing of best practices, from resource libraries to conferences, elevates both partners.

3. Pain point: Partners become stronger competitors

Volume growth at both partners is often a main driver for entering affiliations. But as partners remain independently owned and operated, cannibalization can become a distinct possibility if there is overlap among their primary markets. Affiliates may fear they won't see patients again after referring them to a hub for specialized services. Hubs may fear that they're creating more formidable competitors in their market. At the end of the day, this contention can corrode the spirit of affiliations.

Solution: Affiliates and hubs can look beyond primary market competitors for potential partners to minimize the chance of cannibalization. Affiliates can have greater confidence that they won't lose their patients to the hub after referring them for specialized services. Hubs can bring in volumes for their specialized destination services and not feel like they're training their replacement, but instead realizing broader geographic reach. For partners in overlapping markets, building a shared understanding of each other's capabilities and optimal care settings for different services can improve the relationship.

There's more than just M&A—get the field guide for hospital partnership and affiliation models

Behind the flurry of M&A in recent years, a deeper trend of hospital integration is underway: the emergence of alternative partnerships that secure many of the same benefits of M&A without the financial and legal commitment: Clinical affiliation, regional collaborative, accountable care organization, and clinically integrated network.

This guide defines these types of partnerships and offers benefits, drawbacks, and examples of organizations in each.